“KEPCO to Freeze Electricity Tariffs in Second Quarter Despite $202 Trillion Debt”

The fuel cost adjustment unit price is maintained at the current level
Growth is expected in the second half due to a large cumulative deficit

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Electricity tariffs were frozen in the second quarter (April-June). However, as the accumulated debt of Korea Electric Power Corporation exceeds 200 trillion won, it is forecast to increase in the second half.

KEPCO announced on the 21st that it will maintain the second quarter fuel cost adjustment unit price of 5 won per ◇ (kilowatt hour). Electricity tariffs are made up of basic rate, electricity rate, climate rate and fuel cost adjustment rate. Among them, the item that reflects the short-term trends in energy prices is the fuel cost adjustment unit price, which KEPCO announces by the 21st of the month before the start of each quarter.

The fuel cost adjustment unit price is determined within a range of ±5 won, and KEPCO currently applies a maximum value of +5 won. KEPCO initially estimated the unit price of the fuel cost adjustment applied in the second quarter to be 2.5 won. This is because it reflects the recent stabilization of international energy prices. However, the Ministry of Trade, Industry and Energy ordered to maintain +5 won in view of KEPCO's financial crisis. As the power authorities did not increase the base rate, volume rate and climate rate separately, the electricity rates remained frozen for the second quarter.

In 2022, when energy prices rose due to the war between Russia and Ukraine, KEPCO recorded an operating loss of around 32 trillion won by supplying electricity at below cost. Electricity purchased from power companies for 162.13 won per unit was sold for 120.51 won. Since the second half of last year, international energy prices have stabilized, and the company managed to turn into a surplus. Last January, the electricity sales margin (selling price – buying price) rose to 26.64 won.

However, as the cumulative deficit from 2021 to 2023 rose to 43 trillion won, the total debt on a consolidated basis rose to 202 trillion won. That is why there are forecasts that electricity tariffs will increase in the second half of the year. Trade, Industry and Energy Minister Ahn Deok-gyun said at a personnel hearing in January. “We are also looking at a plan to adjust interest rates in phases when the time is right.”

Sejong Reporter Lee Jeong-su

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